Has Ethanol Helped Lower Gas Prices?

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Has Ethanol Helped Lower Gas Prices?

A new study claims the growth in ethanol production over the last 12 years has reduced wholesale gas prices.

The study from Iowa State University's Center for Agricultural and Rural Development (CARD) also finds that ethanol lowered gasoline prices by just over $1.00 per gallon in 2011. But Marlo Lewis, senior fellow for the Competitive Enterprise Institute's (CEI) Center for Energy and Environment, says the study does not pass the laugh test.

"Gas prices this year hit an all-time high at the same time that ethanol production hit an all-time high, and yet they're telling us that ethanol is some kind of great solution to the problem of high gas prices," he notes. "If this is success, what does failure look like?"

But getting past the initial reaction, Lewis adds that a closer look at the study reveals the authors explored how much gasoline would cost if the motor fuel supply were reduced by ten percent -- the amount that ethanol makes up in today's motor fuel. The CEI senior fellow says that is unrealistic.

"They want us to believe that all of these resources, like refining capacity, that are now dedicated to ethanol production because the law requires it would simply have been left idle over the last ten years and that the refiners would not have used that to make gasoline instead of ethanol," he comments.

Lewis adds that there is a market demand for ethanol as an octane booster, so ethanol would not disappear from the equation altogether.